From the first announcement of Death Knights as a class to the current beta status, a lot has already changed for this class. So some people heard outdated news and now believe things about the Death Knight that aren't true any more. In this post I'm going to explain how the Death Knight currently works, and try to dispel some of the rumors.
First of all the conditions to create a Death Knight have been significantly lowered since the first announcement. The only thing you need to have is one character of at least level 55 from another class, and you'll be able to create a new Death Knight. You don't lose your previous character, there is no transformation into Death Knight, you simply make a new character. You don't need to be level 80 or do some high level quest. Just at least one character on one server with at least level 55 will enable you to create one Death Knight on every server. You can never create more than one Death Knight per server, because they would make too good tradeskill or banking mules. Any race can be a Death Knight, not only the gnomes you see all over the beta. ;)
Second I'd like to talk about the Death Knights rune sword, which figured heavily in the early marketing. In the current beta version you start out with a two-handed green sword, which you upgrade to a two-handed blue sword. But you aren't forced to use only two-handed swords. You can use polearms, two-handed swords, axes, or maces, or even dual-wield one-handed swords, axes, or maces. So there isn't really a "rune sword", there are just runes which are associated with you, not your weapon. What you do have is runeforging, a selection of Death Knight specific weapon enchantments, with which you can add special effects to your weapons. I'll leave the theorycrafting of whether dual-wielding or two-handed weapons are better for Death Knights to somebody else.
So even without a sword, a Death Knight has 6 runes: 2 blood, 2 frost, 2 unholy. In some previews you could read that you'd be able to adjust that, for example take 3 blood, 2 frost, 1 unholy, or any other combination. In the current state you simply can't, you're stuck at 2-2-2, and if I read the beta forums correctly, this isn't going to change in release. As a Death Knight you have two sorts of spells: One sort uses runes, for example "1 blood", or "1 frost and 1 unholy". When you cast such a spell, the respective rune(s) under your character profile grey out, and then come back after a 10-second cooldown. As you have only 2 of each, if you use two abilities using the same type of rune shortly after each other, you're out of that type of rune for a while, and need to use abilities using other runes. Unfortunately that doesn't combine well with talent tree specialization: If for example you put all or most of your talent points in the blood tree, as my beta death knight, you get additional spells using blood runes. But then you have lots of spells using blood runes, and few spells using frost or unholy runes, and you can't use them because you are limited to 2 blood runes. So for me a system with which you could change your mix of runes would have been preferable.
The second sort of Death Knight spells uses runic power. Every time you use a spell that uses runes, your runic power bar fills up. There are also talents that add to your runic power in other ways. But otherwise it works a bit like warrior's rage: The runic power bar starts at zero, fills up during combat from you using your rune spells, and then allows you to unleash the runic power with various runic power spells. Runic power isn't blood-frost-unholy type specific, fortunately. By the way, one of the best Death Knight spells, Death Grip, which makes an enemy jump right in front of you, uses neither runes nor runic power. It's just for free, and instant, but with a 30-second cooldown. Nevertheless I think the thing will be extremely powerful in PvP, especially in large group PvP. If you ever fought in Alterac Valley, you know the situation that sometimes large blocks of enemy combatants face each other, and the first players to move forward are the first to die. Being able to pluck out a caster or healer at range from the enemy group and teleport him into your group where he will quickly be killed is a powerful thing. Or you can use it to remove a defender from a flag or other strategic position. Up to now WoW doesn't have all that many abilities that enable you to move another player, you can mostly only stop him from moving. Death Knights can do both. And the thing is useful for PvE pulling and prevention of runners as well, plus has a taunt ability added for group PvE.
So this are the Death Knight powers, but how does he play? A bit like a dps warrior or rogue, just with less downtime, because Death Knights have some blood talents to heal themselves. As I mentioned before, a Death Knight starts at level 55 in an instanced zone, shared with other Death Knights but no other classes. He has to do a series of destiny quests, which give him his talent points, his mount, his special abilities, and upgrade his gear from green to blue quality. At the end of that destiny quest series the Death Knight is level 57, and is released into the real Azeroth, in the Eastern Plaguelands. Lots of Death Knights level up there to 58, before moving to Outlands. I'd recommend moving to Silithus or Winterspring instead, where there are less other players around; or you could even already get to Outlands at level 57, with the help of a friendly mage, or by first traveling to Dalaran and porting to Shattrath from there. The Death Knight at level 57 is wearing gear which is nominally blue, but in reality has near-epic stats that surpass most level 60 pre-TBC blues. That means he is a killing machine, and makes xp faster by killing lots of mobs than by doing quests that require much traveling. In the Outlands a Death Knight can then start to find better gear, and level to 70 quickly, as the xp requirements for level 61 to 70 have been halved in WotLK compared to TBC, at least in the current beta state. I can't say much yet about how good Death Knights are in a group, but as solo leveling machines they are already awesome.
Finally one more word of advice: Don't miss out on training for your Death Knight! Death Knights can only train in Ebon Hold, a place they can always reach by a special teleport gate spell. But there isn't one class trainer in Ebon Hold, there are three: One for blood, one for frost, and one for unholy. To learn all the new spells when you make a new level, you must visit *all three* trainers, not just one of them.